Following the appointment of Shenzhen Konka's (000016.SZ) new executive leadership earlier this year, the company released its first semi-annual report last week. In the first half of 2017, Konka's operating revenue surged by 32.49% year-over-year to reach 11.4 billion yuan. Meanwhile, the company's net profit attributable to shareholders of the listed entity climbed by 140.53% year-on-year to 30,783,300 yuan, with earnings per share standing at 0.0128 yuan. These impressive figures reflect Konka's proactive efforts to implement institutional changes, integrate resources efficiently, expedite transformations, and boost profitability.
Market-Oriented Reforms in Progress
In the first quarter of this year, Konka successfully completed the open and market-driven recruitment of its senior management team, formally appointing new high-ranking executives. Additionally, the market-oriented restructuring of various business units is progressing steadily. Breaking free from the constraints of the state-owned holding system holds significant importance for Konka in today's highly competitive industry landscape. Since 2016, Konka has been striving to innovate, with strong backing from its major shareholder, OCT Group. Currently, the restructuring of the mobile phone division, small household appliance segment, and set-top box business has been completed. The white goods and internet operation sectors have also received approval and are undergoing reform implementation.
After these structural adjustments, Konka has quietly restructured its core color TV business. The original multimedia business unit, overseas business unit, color TV business unit, and Shenzhen Vision Industry Commercial Display Co., Ltd. have merged to form the Konka Multimedia Industry Division. This merger aims to achieve comprehensive coordination and organic integration across the entire color TV business chain, followed by a series of organizational structure adjustments.
"This is merely the initial step in Konka's broader push for reform within the color TV business," stated President Zhou Bin. "In the restructuring process, the first priority is to adjust the organizational structure to ensure that management structures, equity frameworks, and governance models align with the requirements of the reform."
According to Zhou Bin's plans, the design of the large color TV business restructuring framework will be finalized and approved in 2017, with implementation scheduled for late 2017 and early 2018. Once the color TV business reform is complete, all of Konka's operations will have undergone mechanism reform.
Chairman Liu Fengxi also disclosed that "this year's top priority is the corporatization of the color TV business, emphasizing the separation of the group from the business." The color TV reform is anticipated to conclude next year. Moving forward, the Konka Color TV business will leverage its parent entities, like Konka Group, to strengthen capital operations.
Activating the TV Business through "Soft and Hard" Integration
The color TV business remains the cornerstone of Konka. Facing challenges such as rising upstream costs, intense price competition in the terminal market, and shrinking industry scale, Konka employs the "hardware + software" and "terminal + user" models to revitalize its color TV business and enhance its competitiveness.
In the first half of the year, Konka continued consolidating resources and collaborated with China Mobile to launch the Michaa Konka TV. It also became the top sponsor of the Jiangsu Suning Football Club and signed on as the official Chinese partner of the Spanish Football League in July 2017, a move aimed at boosting Konka's brand vitality.
During the reporting period, Konka's smart TV operations revenue and net profit saw significant year-on-year growth. The company independently developed products such as YiYi, YiGou, KTV, and Game World, which strengthened user engagement and brand soft power. Consequently, the company transitioned from the traditional hardware value-added profit model to the "hardware + software" and "terminal + user" models.
Konka also strives to enhance product competitiveness by integrating research, production, and supply systems and optimizing product mixes. In the first quarter of 2017, Konka TV sales rose by approximately 40%. Large-sized TVs measuring 55 inches or larger accounted for over 50% of the sales structure, indicating an upward performance trajectory.
"Color TV business growth primarily stems from product upgrades, overseas markets, and user operations," remarked Chang Dong, Assistant Chairman of Konka Group and President of the Multimedia Business Division. First and foremost, the brand must evolve into a younger, premium brand. Konka is optimistic about the future of next-generation OLED TVs and will intensify research efforts.
In overseas markets, Konka Color TV currently focuses on ODMs, which have historically played a crucial role in expanding the company's global presence. Last year, overseas sales surpassed four million units. Chang Dong revealed that "over the next three to five years, international branding is our strategic choice, starting with developing countries before moving into developed markets."
User operations represent another growth area for Konka's color TV business. "Last year's internet operating profits approached 150 million yuan." As of June 2017, Konka had accumulated 19.7 million terminal users and 10.88 million active monthly users.
Shifting to an Investment Platform for Smarter Ecosystems
Looking ahead, Konka Group will not only remain a color TV company but will transform into an investment holding platform to accelerate the enhancement of its smart ecosystem.
Liu Fengxi mentioned that to expand its investment activities, Konka Group has formed six or seven investment teams to manage its investment business using market-driven approaches.
"A listed company is a capital platform that seeks capital appreciation. Value creation doesn't necessarily hinge on a single product or industry," Liu Fengxi noted. Konka Group's shift toward an investment holding platform involves two key steps: expanding new product lines to find fresh growth opportunities and achieving expansion via investments and acquisitions.
He believes that both domestically and internationally, many enterprises grow through mergers and acquisitions—whether it's global giants like Cisco, Apple, or Google, or domestic powerhouses such as Tencent and Alibaba. Konka too must utilize its listed company platform to drive industrial expansion. For instance, Konka has recently planned to invest up to 1 billion yuan to establish an industrial fund with China Eastern Asset Management (International) Holdings Co., Ltd., focusing on investing in the TMT sector, smart manufacturing, new energy, new materials, and health industries to aid market growth.
Konka aims to leverage its long-standing industry advantages in the color TV sector through numerous direct investment ventures to build an Internet of Things ecosystem. For instance, Konka will selectively invest in IoT companies, either through equity or controlling stakes.
In May, Konka acquired shares in Chu Tianlong Smart Card and increased its investment in Yu Xu Smart Company, signaling the start of its IoT industry layout and opening up a new trillion-dollar market.
Last July, Konka also established the Science and Technology Industrial Park headquarters, led by the president himself. Committed to becoming the heart of industrial development, the park serves as a carrier for development, with equity investment as its foundation. Combining production and financial resources, the park acts as a service provider for target industrial planning and operations, creating a new "technology + industry + urbanization" development model to diversify product lines and profit streams. Currently, the Konka Smart Appliance Industrial Park and related supporting projects in Zhangzhou have officially commenced. Negotiations are underway for industrial real estate projects in Xi'an and Chengdu.
To accelerate its strategic layout, Konka recently signed a strategic cooperation agreement with Orient Assets and ventured further into the "investment control + finance" sector. "Primarily, we aim to integrate Konka's production and finance through Orient Assets, accelerate industrial mergers and acquisitions, and facilitate industrial upgrades. Additionally, we hope to build Konka's own financial services and establish a comprehensive financial business platform," Zhou Bin stated.
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